Income Tax on Gifts: Exemptions and computation
Receiving Gift indeed brings a cheerful smile on the face of the receiver, but if receiver gets to know that he has to pay tax thereon, the smiling face may turn sad.
Although Gift Tax Act has been abolished, however there are certain provisions in the Income Tax Act, which make the gift taxable in the hands of the recipient.
Today we are sharing with you certain circumstances as to how gift will be taxable as per section 56(2)(X).
- Cash:
If aggregate value is less than Rs.50000 than nothing will be taxable. If value exceeds Rs. 50,000, the whole amount will be taxable. - Movable Property as Gift:
a) Without consideration:
Where any person receives, in any previous year, from any person or persons any property other than immovable property without consideration, the aggregate fair market value of which exceeds fifty thousand rupees, the whole of the aggregate fair market value of such property will be taxable in the hands of receiver.
b) For Inadequate Consideration:
Where any person receives, in any previous year, from any person or persons any property other than immovable property for a consideration which is less than the aggregate fair market value of the property by an amount exceeding fifty thousand rupees, the aggregate fair market value of such property as exceeds such consideration.
The excess differential amount will be taxable in the hands of receiver. - Immovable Property as Gift:
a) Without Consideration:
Where any person receives, in any previous year, from any person or persons any immovable property without consideration and the stamp duty value of which exceeds fifty thousand rupees then in such case, the stamp duty value of such property will be taxable in the hands of receiver.
b) For Inadequate Consideration:
Where any person receives, in any previous year, from any person or persons any immovable property for a consideration, the stamp duty value of such property as exceeds such consideration, if the amount of such excess is more than the higher of the following amounts:
(i) the amount of fifty thousand rupees; and
(ii) the amount equal to five per cent of the consideration
The excess differential amount will be taxable in the hands of receiver. - Some Exempt gifts
If any gifts are received in following situations or from below mentioned people then those gifts will be fully exempt under Income Tax.
Any sum of money or any property received:
• from any relative; or
• on the occasion of the marriage of the individual; or
• under a will or by way of inheritance; or
• in contemplation of death of the payer or donor or
• from any local authority or
• from any fund or foundation or university or other educational institution or hospital or other medical institution or any trust or institution referred to in clause (23C) of section 10; or
• from or by any trust or institution registered under section 12A or section 12AA; or
• by any fund or trust or institution or any university or other educational institution or any hospital or other medical institution or
• by way of transaction not regarded as transfer under clause (i) or clause (iv) or clause (v) or clause (vi) or clause (via) or clause (viaa) or clause (vib) or clause (vic) or clause (vica) or clause (vicb) or clause (vid) or clause (vii) of section 47; or
• from an individual by a trust created or established solely for the benefit of relative of the individual.
• any compensation or other payment, due to or received by any person, by whatever name called, in connection with the termination of his employment or the modification of the terms and conditions relating thereto
Note: In the above-mentioned points the term Relatives means
– Spouse of Individual
– Brother & Sister of Individual
– Brother & Sister of Spouse of Individual
– Brother & Sister of either of the parents of Individual
– Any Lineal ascendants or descendants of the individual
-Any Lineal ascendants or descendants of the spouse of the individual.
Below is a comprehensive list of Donors as per definition of relative under I.Tax Act (Hindi connotation has also been mentioned)
List of Male Donors List of Female Donors
Father (Papa or Pitaji) Mother (Maa or Mummy)
Brother (Bhai) Sister (Bahin)
Son (Beta or Putra) Daughter (Beti or Putri)
Grand Son (Pota or Potra) Grand Daughter (Poti or Potri)
Husband (Pati) Wife (Patni)
Sister’s Husband (Jija) Brother’s Wife (Bhabhi)
Wife’s Brother (Sala) Wife’s Sister (Sali)
Husband’s Brother (Dewar) Husband’s Sister (Nanad)
Mother’s Brother (Mama) Mother’s Sister (Mausi)
Mother’s Sister Husband (Mausa) Wife’s brother’s wife (Sala Heli)
Father’s Brother (Chacha or Tau) Father’s Brother’s Wife (Chachi or Tai)
Father’s Sister’s Husband(Fufa) Father’s Sister (Bua)
Grand Father (Dada, Pardada) Grand Mother (Dadi, Pardadi)
Daughter’s Husband (Jawai) Son’s Wife (Bahu or Putra Vadhu)
Spouse Father (Sasur) Spouse Mother (Sas)
Spouse Grand Father (Dada Sasur) Spouse Grand Mother (DadiSas)
Brother’s Wife (Bhabhi) Mother’s Brother’s Wife (Mami)
Husband’s Brother’s Wife (Devrani or Jithani)